1.
a.
Concept introduction:
Overhead rate: Overhead cost refers to those cost associated with running a business that can’t be linked to creating or producing a particular product or services. It is calculated as the total of indirect costs for a specific reporting period, divided by an allocation measure. There are wide range of allocation measures such as machine hours, direct labor hours, etc. Fixed costs, variable costs and semi-variable costs are the three types of overheads.
The ICU and other overhead rates.
1.
b.
Concept introduction:
Overhead rate: Overhead cost refers to those cost associated with running a business that can’t be linked to creating or producing a particular product or services. It is calculated as the total of indirect costs for a specific reporting period, divided by an allocation measure. There are wide range of allocation measures such as machine hours, direct labor hours, etc. Fixed costs, variable costs and semi-variable costs are the three types of overheads.
The total cost, including direct materials, direct labor and applied overhead, assigned to patient A and patient B.
2.
a.
Concept introduction:
Overhead rate: Overhead cost refers to those cost associated with running a business that can’t be linked to creating or producing a particular product or services. It is calculated as the total of indirect costs for a specific reporting period, divided by an allocation measure. There are wide range of allocation measures such as machine hours, direct labor hours, etc. Fixed costs, variable costs and semi-variable costs are the three types of overheads.
The predetermined overhead rate.
2.
b.
Concept introduction:
Overhead rate: Overhead cost refers to those cost associated with running a business that can’t be linked to creating or producing a particular product or services. It is calculated as the total of indirect costs for a specific reporting period, divided by an allocation measure. There are wide range of allocation measures such as machine hours, direct labor hours, etc. Fixed costs, variable costs and semi-variable costs are the three types of overheads.
The total cost, including direct materials, direct labor and applied overhead, assigned to patient A and patient B.
3.
Concept introduction:
Overhead rate: Overhead cost refers to those cost associated with running a business that can’t be linked to creating or producing a particular product or services. It is calculated as the total of indirect costs for a specific reporting period, divided by an allocation measure. There are wide range of allocation measures such as machine hours, direct labor hours, etc. Fixed costs, variable costs and semi-variable costs are the three types of overheads.
The insight that is revealed by the staff accountant’s approach.
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MANAGERIAL ACCOUNTING
- Product costing and decision analysis for a service company Pleasant Stay Medical Inc. wishes to determine its product costs. Pleasant Stay offers a variety of medical procedures (operations) that are considered its products. The overhead has been separated into three major activities. The annual estimated activity costs and activity bases follow: Total patient days are determined by multiplying the number of patients by the average length of stay in the hospital. A weighted care unit (wcu) is a measure of nursing effort used to care for patients. There were 192,000 weighted care units estimated for the year. In addition, Pleasant Stay estimated 6,000 patients and 27,000 patient days for the year. (The average patient is expected to have a a little more than a four-day stay in the hospital.) During a portion of the year, Pleasant Stay collected patient information for three selected procedures, as follows: Private insurance reimburses the hospital for these activities at a fixed daily rate of 406 per patient day for all three procedures. Instructions Determine the activity rates. Determine the activity cost for each procedure. Determine the excess or deficiency of reimbursements to activity cost. Interpret your results.arrow_forwardBounce Back Insurance Company carries three major lines of insurance: auto, workers compensation, and homeowners. The company has prepared the following report: Management is concerned that the administrative expenses may make some of the insurance lines unprofitable. However, the administrative expenses have not been allocated to the insurance lines. The controller has suggested that the administrative expenses could be assigned to the insurance lines using activity-based costing. The administrative expenses are comprised of five activities. The activities and their rates are as follows: Activity-base usage data for each line of insurance were retrieved from the corporate records as follows: a. Complete the product profitability report through the administrative activities. Determine the operating income as a percent of premium revenue, rounded to the nearest whole percent. b. Interpret the report.arrow_forwardActivity-based costing in an insurance company Umbrella Insurance Company carries three major lines of insurance: auto, workers' compensation, and homeowners. The company has prepared the following report for 20Y2: Management is concerned that the administrative expenses may make some of the insurance lines unprofitable. However, the administrative expenses have not been allocated to the insurance lines. The controller has suggested that the administrative expenses could be assigned to the insurance lines using activity-based costing. The administrative expenses are comprised of five activities. The activities and their rates are as follows: Activity-base usage data for each line of insurance were retrieved from the corporate records and are shown below. a.Complete the product profitability report through the administrative activities. b.Determine the underwriting income as a percent of premium revenue. C.Determine the Operating income as a percent of premium revenue, rounded to one decimal place. d.Interpret the report.arrow_forward
- Activity-Based Product Costing Suppose that a surgical ward has gathered the following information for four nursing activities and two types of patients: Patient Category Driver Normal Intensive Activity Rate Treating patients Treatments 7,400 9,500 $4.00 Providing hygienic care Hygienic hours 5,300 18,600 5.00 Responding to requests Requests 32,000 80,000 2.00 Monitoring patients Monitoring hours 6,000 72,000 3.00 Required: 1. Determine the total nursing costs assigned to each patient category. Costs Assigned Normal $fill in the blank 1 Intensive $fill in the blank 2 2. Output is measured in patient days. Assuming that the normal patient category uses 8,000 patient days and the intensive patient category uses 6,400 patient days, calculate the nursing cost per patient day for each type of patient. Round your answers to the nearest cent. Normal $fill in the blank 3 per patient day Intensive $fill in the blank 4 per patient day 3. Conceptual…arrow_forwardActivity Costing, Assigning Resource Costs, Primary andSecondary ActivitiesElmo Clinic has identified three activities for daily maternity care: occupancy and feeding,nursing, and nursing supervision. The nursing supervisor oversees 150 nurses, 25 of whomare maternity nurses (the other nurses are located in other care areas such as the emergencyroom and intensive care). The nursing supervisor has three assistants, a secretary, severaloffices, computers, phones, and furniture. The three assistants spend 75% of their timeon the supervising activity and 25% of their time as surgical nurses. They each receive asalary of $60,000. The nursing supervisor has a salary of $80,000. She spends 100% of hertime supervising. The secretary receives a salary of $35,000 per year. Other costs directlytraceable to the supervisory activity (depreciation, utilities, phone, etc.) average $170,000per year.Daily care output is measured as “patient days.” The clinic has traditionally assigned the costof daily…arrow_forwardActivity-Based Product Costing Suppose that a surgical ward has gathered the following information for four nursing activities and two types of patients: Patient Category Driver Normal Intensive Activity Rate Treating patients Treatments 6,900 8,000 $4.00 Providing hygienic care Hygienic hours 4,800 17,600 5.00 Responding to requests Requests 32,000 80,000 2.00 Monitoring patients Monitoring hours 6,000 72,000 3.00 Required: 1. Determine the total nursing costs assigned to each patient category. Costs Assigned Normal $ Intensive $ 2. Output is measured in patient days. Assuming that the normal patient category uses 8,000 patient days and the intensive patient category uses 6,400 patient days, calculate the nursing cost per patient day for each type of patient. Round your answers to the nearest cent. Normal $ per patient day Intensive $ per patient day 3. Conceptual Connection: The supervisor of the surgical ward has suggested that patient…arrow_forward
- Wolseley’s dilemma of Traditional Costing versus Activity Based Costing Wolseley Manufacturing Corporation manufactures various electronics products and follows a traditional (job-order) costing system in which it applies manufacturing overhead to its products using a predetermined overhead rate based on direct labour-hours (DLHs). The company has two products, C18R and G19R, about which it has provided the following data: C18R G19R Direct materials per unit $10.20 $50.50 Direct labour per unit $8.40 $25.20 Direct labour hours per unit 0.40 1.20 Annual production 30,000 10,000 The company's estimated total manufacturing overhead for the year is $1,464,480 and the company's estimated total direct labour-hours for the year is 24,000.The company is considering using a variation of activity-based costing to determine its unit product costs for external reports. Data for this proposed activity-based costing system appear below: Activities…arrow_forwardComputing and using activity-based costing overhead allocation rates Koehler (see Exercise E19-15 and Exercise E19-16) makes handheld calculators in two models—basic and professional—and wants to further refine its costing system by allocating overhead using activity-based costing. The estimated $721,000 of manufacturing overhead has been divided into three primary activities: Materials Handling, Machine Setup, and Insertion of Parts. The following data have been compiled: Requirement 1 Koehler expects to produce 200,000 basic models and 200,000 professional models. Compute the predetermined overhead allocation rates using activity-based costing. How much overhead is allocated to the basic model? To the professional model? Requirement 2 Compare your answers for Exercise E19-15, Exercise E19-16, and Exercise E19-17. What conclusions can you draw? Note: Short Exercise S19-15 and ES19-16 must be completed before attempting Short Exercise 519-17.arrow_forwardActivity-Based Product Costing Suppose that a surgical ward has gathered the following information for four nursing activities and two types of patients: Patient Category Driver Normal Intensive Activity Rate Treating patients Treatments 6,400 8,000 $4.00 Providing hygienic care Hygienic hours 4,800 17,600 5.00 Responding to requests Requests 32,000 80,000 2.00 Monitoring patients Monitoring hours 6,000 72,000 3.00 Required: 1. Determine the total nursing costs assigned to each patient category. Costs Assigned Normal $ Intensive $ 2. Output is measured in patient days. Assuming that the normal patient category uses 8,000 patient days and the intensive patient category uses 6,400 patient days, calculate the nursing cost per patient day for each type of patient. (Round to two decimal places.) Normal $ per patient day Intensive $ per patient day 3. Conceptual Connection: The supervisor of the surgical ward has suggested that patient…arrow_forward
- Murdocn Ledr XAA is considering different costing options. They are now using a traditional costing procedures which applies overhead on the basis of machine hours. They have two products, A and B. XAA is considering a shift to activity-based costing and has created three cost pools. Data ón the cost pools and respective driver are shown below. Pool 1 Pool 2 Pool 3 Driver: Machine Driver: Driver: Product hour setup parts 2,250 A 1,200- 45 2,800 55 750 Pool Cost 160,000 280,000 360,000 $4 The overhead cost allocated to product A by using activity-based costing procedures would be: O a. $240,000. O b. $356,000. O c. $444,000. o d. $560,000. O e. some other amount. O Type here to searcharrow_forwardplease answer within the format by providing formula the detailed workingPlease provide answer in text (Without image)Please provide answer in text (Without image)Please provide answer in text (Without image) Churchill Products is considering updating its cost system to an activity-based costing system and is interested in understanding the effects. The company’s cost accountant has identified three overhead cost pools along with appropriate cost drivers for each pool. Cost Pools Costs Activity Drivers Utilities $ 315,000 63,000 machine-hours Scheduling and setup 300,000 600 setups Material handling 795,000 1,590,000 pounds of material The company manufactures three models of water basins (Oval, Round, and Square). The plans for production for the next year and the budgeted direct costs and activity by product line are as follows. Products Oval Round Square Total direct costs (material and labor) $ 80,000 $ 70,000 $ 80,000 Total…arrow_forwardE4-14 Venus Creations sells window treatments (shades, blinds, and awnings) to both commercial and residential customers. The following information relates to its budgeted operations for the current year. $300,000 Direct materials costs Direct labor costs 150,000 Setup time 500,000 Supervision $ 30,000 100,000 Commercial Operating income (loss) $480,000 Overhead costs Revenues $85,000 85,000 Estimated Overhead 90,000 60,000 $85,000 The controller, Peggy Kingman, is concerned about the residential product line. She cannot understand why this line is not more profitable given that the installations of window coverings are less complex for residential customers. In addition, the residential client base resides in close proximity to the company office, so travel costs are not as expensive on a per client visit for residential customers. As a result, she has decided to take a closer look at the overhead costs assigned to the two product lines to determine whether a more accurate product…arrow_forward
- Managerial AccountingAccountingISBN:9781337912020Author:Carl Warren, Ph.d. Cma William B. TaylerPublisher:South-Western College PubFinancial And Managerial AccountingAccountingISBN:9781337902663Author:WARREN, Carl S.Publisher:Cengage Learning,Survey of Accounting (Accounting I)AccountingISBN:9781305961883Author:Carl WarrenPublisher:Cengage Learning